Prime office rents hold steady in Raffles Place, Marina Bay as businesses adapt to new trends

SINGAPORE: Prime office rents in the Raffles Place and Marina Bay precinct remained steady at $11.36 per square foot (psf) per month in the first quarter of 2025, showing no change from the previous quarter but marking a 1.4% year-on-year (YoY) increase, according to Knight Frank’s latest market report featured by a recent Singapore Business Review article.

This modest rise is largely attributed to a mix of businesses renewing their leases at existing locations and a growing trend of “flight-to-quality” as companies seek higher-grade office spaces. The shift toward more premium offices appears to be fueled by evolving workplace dynamics, with many businesses embracing AI technology to streamline operations. This adoption of AI across a range of job functions is reducing the need for large office spaces as firms adapt to more flexible and efficient layouts. Smaller office footprints are becoming increasingly viable as a result.

Despite the stability in rental prices, the Central Business District (CBD) saw a slight dip in occupancy levels, which fell by 0.2 percentage points to 93.5% quarter-on-quarter (QoQ). This minor decrease can be linked to the completion of Keppel South Central, with 50% of the space already committed or under negotiation, according to Knight Frank.

Calvin Yeo, managing director for occupier strategy and solutions at Knight Frank Singapore, noted that CBD occupancies remain generally healthy as landlords focus on maintaining high occupancy rates despite global uncertainties. “Landlords are placing a priority on securing tenants, especially in light of the broader economic landscape,” Yeo commented.

Looking ahead, the office market in the CBD is expected to see a supply slowdown following the completion of two significant developments: IOI Central Boulevard Towers and Keppel South Central. No major new office projects are anticipated in the near term, except for the Shaw Tower redevelopment on Beach Road. This pause in new supply presents a challenge for large-scale occupiers, particularly those requiring premium-grade office spaces of 30,000 square feet or more. With such expansive floorplates becoming increasingly rare, relocating for large-footprint tenants may not be a realistic option in the short to medium term.

However, Knight Frank anticipates that some businesses will continue to relocate as leases expire, with measured flight-to-quality moves as a dominant trend. As a result of these shifting dynamics, Knight Frank projects a range of 0% to 2% growth in prime office rents across the CBD for the full year of 2025.

With the market balancing between evolving office space needs and limited new supply, the outlook remains cautiously optimistic for Singapore’s prime office sector.